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PIA 2734: . Privatization and Contracting Out: The Knowledge and Skills Base. Privatization. Possibilities and Limitations. Privatization: In the U.S. and the World. Definition: - PowerPoint PPT PresentationTRANSCRIPT
PIA 2734:
Privatization and Contracting Out: The Knowledge and Skills Base
Privatization
Possibilities and Limitations
Privatization: In the U.S. and the World Definition:
The process of divesting direct civil service responsibility for the provision of public services or the collection of revenues
Focus here on the World View in the 1980s as defined by the U.S.
Privatization: Grants and Contracts The Key to Understanding Contracting Out
Prior to 1979: Focus of Contracts was Purchases and construction
Before 1979- Social Services: “Block Grants
Now Social Services: Contracted Out or Categorical Grants (Tied Grants)
Block Grants vs. Categorial GrantsCommunity Development Block Grants Categorial Grants
Tendering is the procurement of acquisition of goods and/or services at the best possible total cost of ownership, in the correct quantity and quality, at the right time, in the right place for the direct benefit or use of governments, corporations, or local authorities, generally by a contract.
Context of Privatization: The Reagan-Thatcher Revolutions Economic Reform and Structural
Adjustment:
a. IMF Stabilization and trade liberalization
b. Currency reform, auctions-end of subsidies (end urban privileges) to end
radical inflation
Next Target for Auction
The Reagan-Thatcher Revolutions
c. Market prices for agriculture and industrial goods
d. Deregulate the economy
e. Most Importantly: Free Trade
f. Domestic Changes followed International Reforms
One View of Free Trade
Conditionality and Privatization
Conditionality- World Bank and UNDP and the "Management“
SAPs- /Structural Adjustment Programs
Focus on Policy and Administrative Reforms
Conditionality- World Bank and UNDP and the "Management“ of Structural Adjustment Countries
One View of SAPs
Conditionalities Reform the Bureaucracy
Decrease Size of Public Service
Individual Consultants, Grantees and Contractors work with investments and the service/commercial sector
Bridging and sectoral loans and grants major source of international involvement
Critics Europe South Africa
Administrative Reforms
1. Strategic Planning and Management
2. Deregulation
3. Performance Management
4. Merit Recruitment
President Ulysses S. Grants Proposed Civil Service Reforms
Administrative Reforms
5. End of Corruption
6. “Reinventing Government”- end to hierarchy and intra-governmental competition
7. Rewards based on Performance
8. Monitoring and contracts management
Principles of Privatization
Key Conditionality- Privatization of the economy within a context of administrative Reform
Principles of Privatization
a. divestiture
b. contracting out
c. liquidation
d. sell off public private partnership shares
The View from the 1080s Redeux
Principles of Privatization
e. International conditions for "good" bureaucrats, eg. World Bank Programs- special salaries for those on contract with the project
f. Goal: Return to the recurrent budgeting process and balanced budget principles of “Neo-Orthodox Economists”
Milton Friedman, 1912-2006University of Chicago
The Fundamental Assumption:Private Provision of Services Use of conventional markets- No public
sector involvement
Contracts with public agencies- Collection of Garbage; foreign aid and technical assistance
Monopoly Franchises: Hoover Dam; Cable Television; Amtrak
Private Provision of Services
Management Contracts- Public Enterprises such as airlines and hotels
Vouchers- private and charter schools
Consumer Cooperatives- Food clubs
Acting Vice Principal showing the their school vouchers.
Privatization “Ideal” Key to the provision of efficient and
effective goods and services (Savas)
Need for Exclusion
User Fees, not taxes
The use of tolls
E-ZPASS
Privatization “Ideal” Key to the provision of efficient and
effective goods and services (Savas)
Need to exclude the Collective Some would argue excluding “common pool
goods” from privatization (Clean Air)
Worthy goods (health, education, etc.) are not collective goods
Privatization Reasons(Madsen Pirie) High Production costs in Government
Low levels of efficiency
Featherbedded labor costs
Pork Barrel Capital Allocations
Privatization- Reasons(Madsen Pirie)
Low level consumer input
Poor Maintenance and loss of service
Inability of political leaders to impose cost control
Free Riders
Privatization Means Liquidation
Close down (Load Shedding)
Divestiture
Sell off in whole or in part government shares
Liquidation
Privatization Means
Public-Private partnerships
Commercialization
Autonomy and user fees
Privatization Means Public Sector Reform
Cutback the infamous 19% first cut
Transfer to a public service organization or union
Contracting Out
The World Bank Formula, 2007 World Bank attempt to privatise Mumbai's
water runs aground: Citizens reject report
Privatization Criticism Private sector and NGOs are not
necessarily more effective and efficient than government agencies (Paul Nelson)
Loss of Coverage for social services
Rule of Structural Adjustment- lower health and education statistics
Privatization Criticism
Can replicate private sector Conditions within government (Core of Reinventing Government argument--Osborne and Gabler)
“Contracting In”- Government Agency provides services for another Agency, NGO or Private Sector (Generating Revenue) (USDA provides staff for USAID)
Options Under Reinventing Government
Privatization Criticism
Reinventing Government
Steering rather than Rowing Customer Driven Government Competition within Government and
between units Key is decentralization--not privatization
Reinventing Government a world wide phenomenon (Korea)
Privatization Criticism Privatization enhances corruption
Enhanced by cultural differences
Gifts vs. Kickbacks
Corruption as lobbying the Executive (Klitgaard)
Problems with Administrative Reform: International Examples
1. Departments buy and sell goods & services- statistics in Zaire/Congo or setting up “privatization networks” to acquire state properties.
2. Sub-economic salaries: offices, houses and telephones- buying soap and selling chickens. International salaries for essential workers (Consulting Practices)
Privatization in LDCs
Problems with Privatization Reality- The absence of recurrent budgets in
LDCs
Activity (economy) driven by technical assistance projects the only game in town
NGOs and for profit contractors and consulting firms take the jobs
Result: Privatization means internationalization
The Principles: Review
Private Provision of Services:
Use of conventional Markets: no public sector involvement (Purely private)
Contracts with public agencies (Contracting Out)
The Principles: Review Monopoly Franchises
Management Contracts
Vouchers
Consumer Cooperatives
Break
Ten Minutes
Discussion Question
Breakout Group: 30 minutes
WHAT ARE THE MAJOR ADVANTAGES AND DISADVANTAGES OF PRIVATIZATION
1. DOMESTICALLY
2. INTERNATIONALLY